Question : What is the alternatives strategies of internationalization that coul
ID: 371902 • Letter: Q
Question
Question : What is the alternatives strategies of internationalization that could have follow the company, and what is the action plan to be followed (1400words)
INTERNATIONAL JOURNAL OF CASE STUDIES IN MANAGEMENT HEC Volume Issu June 20 Market Expansion at ems electronics Case prepared by Professor Dietmar STERNAD Michael Velmeden, managing director of ems electronics gmbh,2 headquartered in Klagenfurt, Austria, was just returning from a visit to China with a German customer in the automotive supplier industry. The customer's company had built a new facility in China for which it required the same engineering and manufacturing services for electronic components as cms electronics had previously supplied for its main production site in Europe. The Austrian electronics company had no facility in Asia, however. Velmeden therefore recommended that cms electronics manage the entire project for the customer, including the engineering, but outsource manufacturing to a local service provider. The proposed model had functioned well with another customer. Velmeden and his customer visited two factories owned by the proposed subcontractor, one in Shenzhen and the other north of Shanghai. The customer seemed impressed by the production facilities but somewhat skeptical about the idea of having his electronic manufacturing services (EMS) provider subcontract to a different service providerExplanation / Answer
Answer: According to my view, Michael Velmeden must have followed the following strategies of industrialization that could have avoided losing his german customer. The strategies are as follows:
Direct exporting: Export as an entry strategy is divided into two as direct and indirect approaches. Direct exporting is entry strategy that allows the firm to sell its products directly into the market of interest. Direct export unlike indirect exporting, the organization makes a direct commitment to the international market [14]. Through direct commitment, the company is capable of having control of its brand and all its operations in the foreign market more than it would be with indirect exporting. Piggybacking is one of the direct exporting where new products of the entering firm use the already existing distribution and logistics of a different business. The other one is the consortia which are the coming together of small or medium-sized enterprises with an aim of marketing their related or even unrelated goods in the international market.
Licensing: Licensing is entry strategy that gives an overseas company the right to use its product or service within a given time. Most of the properties that are normally licensed include copyright, designs, formulae, patents, trademarks, and brand names. In most cases, licensing is used in the manufacturing sector where firms are offered the right to use process technology, and royalty payment is given in return. Financing international expansion can be best done through the use of licensing strategy. It reduces risks and chances of the product appearing on the black market. It is important for the company to analyze properly analyze this strategy as it has the potentials of restricting future activities of the company and reveal much other information that may give an advantage to future competitors.
Franchising: Franchising as a market entry is where a single company supplies other firms with intangible property. This entry mode is mostly used in the service sectors such as car rental, hotels, and restaurant chains. Franchising is known to work well for companies with a repeatable business model like food outlets, which are easily transferable to other markets. The caveats needed to use franchise model has strong and unique brand recognition that is capable of being utilized internationally [9]. There the need for being cautious when going for franchising entry strategy is necessary because it can lead to the creation of future competition in the field of the franchisee.
Internationalisation as a result of a solid strategy can prove to be successful and offer your company a competitive advantage in the worldwide market. Below we summarize the main advantages that your firm is likely to gain from the adoption of an international strategy, based, of course, on the magnitude of your plans and projects:
Hence, taking into account the aforementioned advantages, it is obvious that internationalisation is intertwined with a value chain perspective, i.e. maximising returns and minimising costs in purchasing, production and sales.
Breaking into a foreign market – especially one with strict rules and regulations – can be a very daunting task. Often, business owners have the ambition to go international… they’re just not quite sure where to start.
Here are the eight strategies that you can use to establish a foothold in a new country. Take a look at the list below and see which one is most suited to your business – hopefully, after reading this, you’ll know where you should start.
1 - Franchising your brand
Kicking off the list at #1 is franchising. In case you’re not familiar with franchising, it works like this:
The good thing about franchising is that it’s one of the easier ways to break into new markets. All you have to do is take your existing, successful business model, find a franchisee in your target market, build out the franchise, and open your doors.
The bad thing about franchising is that there is almost always a compromise.
You can scout locations as much as you like, but if you don’t have firm brand recognition in the country you’re trying to break into, you’ll be just another business on the side of the street. That’s not the end of the world – many individual business are still popular – but it’s important to realise that franchising can only be used for certain businesses, and it has a sizeable amount of risk behind it as you’re putting your brand in someone’s hands!
2 - Direct Exporting
Direct exporting is the most common of the eight strategies on this list. It’s pretty simple – you sell directly to the market that you’re trying to break into. For example, if you want to sell to Japan, you get your product into the appropriate Japanese stores and see how it does.
Your friends in direct exporting are your agents and distributors. These people are the branch between you and the stores. Trying to get a foothold with a major Japanese store as a foreigner is a lost cause, but with a reliable agent/distributor (and translation services company) on your side, it’s not! In fact, it’s easy… your agent/distributor have most of the contacts you need to succeed.
Of course, you’ll have to work out shipping logistics and everything else of that nature – but on the surface, direct exporting is very similar to selling products in your domestic market.
3 - Partnering up
Partnering is a relatively vague term. It can be anything, really – you can get a partner in a foreign country to simply help with marketing (and receive a cut of profits), or, you can get a partner in a foreign country who is just as invested in all facets of your business as you are.
We’re big fans of partnering. Of course, you have to vet your potential partners thoroughly and make sure that you’re doing business with someone who will actually help you – not slow you down. But if you can get a good partner, you’ll be able to get a grip on your new market much more easily – he or she will know everything that you don’t about the new market.
(In some areas of the world, a partnership is a borderline necessity. For example, in many Asian countries, you simply will not be able to break ground if you’re a foreigner – you need a partner in each particular country to help you get by regulations and such.)
4 - Joint Ventures
A JV (joint venture) is a partnership between two companies or people. They link up and become invested in some sort of business project – the investment is almost always an equal 50/50, and profits are split accordingly.
Usually, the two companies stay separate from each other, but work together on one particular venture to try and succeed.
5 – Just buying a company
Buying a company in a foreign land is by far the easiest way to enter a new market.
Of course, there are downsides.
6 - Turnkey solutions or products
Do you build something? Maybe your business is in construction or engineering. If you do, it’s worth trying to find turnkey projects in foreign countries to bid on.
“Turnkey” is a pretty apt name – a “turnkey product” is where you build something from the ground up, and whoever you turn the product over to just has to “turn the key” before he or she is ready to go.
These are some of the best contracts to get because they almost always come from governments. On the flip side, everyone knows that these are some of the best contracts to get, and you’ll often be competing with other foreign and domestic firms for the contract.
7 -Piggyback
In order to piggyback, you need to already be selling product to other domestic companies.
If those domestic companies have international presences, all you have to do is give them a ring and ask the following:
“Hi, can you take my products to your international agencies too?”
Of course, phrase it a bit better than that – but you get the point. You’re jumping on the back of your existing business relationship and trying to make it into international markets that way.
8 - Licensing
Licensing is somewhat similar to piggybacking, except instead of talking to domestic firms and asking them to carry the product, you talk to foreign firms and ask them to temporarily own the product.
So for example, if you have a great widget that you feel fits in perfectly with a company’s inventory in your new market, all you’d have to do is contact that company and ask.
We consider licensing to be one of the easiest ways to get started, but it’s not necessarily an “easy process” overall. You first have to convince the firm that your product is right for them. Then, you need to convince them that it will sell. Then, you need to deal with governments and lawyers to iron out all of the legal aspects of the “sale” of the license.
You don’t lose control of your product – it’s not the same as selling the rights to your product. You’re merely licensing the rights to your product to a foreign company for a limited amount of time.